Canaccord Genuity Morning Coffee on Jackson Hole: Will Bernanke’s Speech Be a Non-event?

August 27, 2012 10:58 AM EDT
Canaccord Genuity Morning Coffee on Jackson Hole: Will Bernanke’s Jackson Hole speech on August 31 be a non-event?

Most likely. But some believe Bernanke will use Jackson Hole to realign the financial markets’ expectations regarding upcoming Fed policy. If there were any doubts whether the Fed would ease, they should have been dispelled last week with the minutes from the FOMC's August meeting. The most important part of the release: "Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery." Credit Suisse cautions that while the chances of QE in September look greater than previously expected, U.S. economic data have been generally positive since the Fed’s last meeting and the scope of any additional monetary easing remains tied to shortterm economic performance - recall the unexpectedly strong July non-farm payrolls report. Bill Gross of PIMCO says Fed easing is "almost a done deal". Gross tweeted last Wednesday, "Fed minutes make QE3 and extended period language an 80% probability. Front-end curve friendly." In an interview with CNBC, Gross said when the Fed does move expect "a relative openended program in terms of size, in terms of time and in terms of what the asset classes is they buy and so the Fed has the modify their posture even in the face of a strengthening economy." Gross also said you want to "buy what the Fed is going to buy and buy what the Fed is going to affect." Treasury Inflation-Protected Securities and mortgages are the beneficiaries of these policies according to Gross. The next FOMC meeting is September 12-13.

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Credit Suisse, William H. Gross, Pacific Investment Management Company, LLC (PIMCO), Ben S. Bernanke, Federal Open Market Committee, Canaccord Genuity

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